Explanation:

Statement 1: A consequence of poor competitiveness and high demand for imports is a current account deficit. This means India is purchasing more imports of goods and services than it is exporting. A large current account deficit tends to put downward pressure on a currency. This is because more currency is leaving the country to buy imports than is coming in to buy exports.

Statement 2: Low demand for goods in the economy would actually cut down imports and lead to appreciation of the rupee. This may, however, also lead to a cut back on exports leading to depreciation and balancing the exchange rate. But, if this balancing does not happen, it means that imports are rising faster than exports. Also, in particular, India has a higher inflation rate than its international competitors. In 2013, Indian inflation reached 11.24%. Therefore, there is relatively less demand for the rising price of Indian goods; this reduction in demand causes a fall in the value of the Rupee. Inflation has been moderated in recent years, but remains above the comfort level.